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About a year after its inauguration, the IMF’s Middle East Center for Economics and Finance (CEF), funded by the Kuwait Investment Authority, continues to expand its training on building the knowledge and technical skills needed to effectively manage economies throughout the Arab world.

Thomas Friedman, above, speaks on economic globalization, as part of the CEF’s new series on emerging issues relevant to policymakers in region (Photo: Hussein Ahmad)

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Since its inception, the center has offered about 120 activities, and provided training to more than 5,400 officials from the 22 countries of the Arab League. Gulf Cooperation Council (GCC) countries have been important beneficiaries from the establishment of the center, with over 1,600 trained officials to date.

The CEF’s mission is to build capacity through hands-on training for policymakers from the Arab League, as well as to lead conferences, symposia, and seminars geared at strengthening the design and implementation of sound economic policies for the region.

IMF Survey caught up with Oussama Kanaan, CEF’s Director, about the center’s recent high-level events, current developments, and how he sees the center expanding to provide solutions to some of the region’s most pressing economic challenges.

IMF Survey: How do you see the CEF’s training evolving as a result of new issues emerging from the rapidly changing global environment?

Kanaan: The Center has been strengthening its training for Arab policymakers and practitioners in the core economic areas of the Fund—notably fiscal, monetary and exchange rate policy, international trade and finance, economic growth, and statistics. In these areas, our program is evolving to support the most pressing issues of the region.

These include serious macroeconomic and fiscal pressures due to falling oil prices, intensified conflict, and a migration and refugee crisis. Additionally, global challenges, such as climate change and income inequality, should be considered when forming economic policies. This has led us to take an increasingly multidisciplinary approach to complement our core economics courses, and step up our joint training efforts with the World Bank, OECD, and WTO.

For our most recent symposium, “The World is Fast: How to Understand It and Thrive in It,” which was held last November jointly with the Arab Fund for Economic and Social Development, we chose the broad theme of the economic implications of new global trends. For that event, we invited Thomas Friedman, New York Times columnist and Pulitzer Prize winning author, as the keynote speaker. We knew he would enrich the event by taking not only a flexible approach, but also a bold one in discussing many of the pressing global issues with the participating economists.

The CEF recently held a panel discussion on subsidy reform in the context of falling oil prices. Featured in this photo are the event’s speakers (from left to right): Firas Raad (World Bank); Oussama Kanaan (IMF-CEF); Ananthakrishnan Prasad (IMF) and Imed Limam (AFESD). (Photo: Hussein Ahmad)

IMF Survey: What were the key lessons from that event on the impact of global trends?

Kanaan: The event’s main objective was to explore ways in which Arab economies could successfully cope with emerging global challenges. In my view, the symposium and follow-up discussions brought up three crucial points for policymakers in the region:

First, rapid economic globalization is raising productivity growth and the competiveness of exports from emerging market economies, especially in East Asia. This makes it more urgent for competitor economies, including in the Arab world, to take steps to accelerate private sector development. Priority measures include institutional and legal reforms to ensure good governance, removing impediments to trade and investment, and ensuring a level-playing field between public sector companies and small and medium-sized enterprises. The need to expand and diversify private sector production and exports has become even more pressing for the GCC countries in view of declining oil prices.

Second, the digital revolution has further raised the pace of economic globalization, and compounded its positive impact on many emerging market economies’ competitiveness and exports including services outsourced from developed economies.

Given the rising competition in international markets, it is particularly important for developing economies, including those in the Arab world, to press ahead with steps to invest in and raise the quality of education and vocational training to ensure that the potential benefits of the digital revolution are adequately harnessed.

The third global challenge stems from the potential adverse economic impact of global warming if carbon dioxide emissions continue on current trends. The Arab Gulf region is particularly vulnerable to waves of very high heat and humidity that could pose a challenge to human habitability by the end of this century, potentially diverting resources to counter their impact and dampening economic growth. This underscores the urgency of measures to curb emissions, such as those agreed at the Paris Climate Change Conference.

IMF Survey: Do you think these lessons could easily be taken on board when forming economic policies?

Kanaan: Global trends that impact national economies gradually or with a longer time lag—such as the economic impact of the digital revolution or climate change—are often more difficult to measure. Part of the difficulty stems from the absence of comparable past occurrences, unlike, for example, economic depressions or financial crises for which lessons could be derived from past episodes.

Nevertheless, I think it is important for thoughtful, well-rounded discussions among economists to seriously consider the potential impact of global challenges especially when that impact can be influenced through economic policies. For example, the adverse impact of global warming could, over time, be tempered through appropriate taxation of fossil fuels and greenhouse gas emissions.

IMF Survey: The Center co-organized—with the Central Bank of Kuwait and the IMF’s Middle East and Central Asia Department—the Islamic Finance Conference: Meeting Global Aspirations. How was the feedback from participants?

Kanaan: Islamic Finance is not typically associated with the work of the IMF, and participants were impressed by the Fund’s spearheading, jointly with Kuwait’s Central Bank, of a global discussion in an area which, while outside of international finance’s mainstream, has been rapidly growing in importance. Feedback was particularly positive on the discussion of the links between Islamic finance and inclusive growth.

A particularly well-received message, underscored by the Managing Director in her keynote address, has been that Islamic finance has ample potential to contribute to broad-based growth. Only one quarter of adults of the world’s Muslim population has access to bank accounts, and Islamic finance is highly suited to small and medium-sized enterprises and startup financing.

In retrospect, I see that the IMF’s early involvement and analytical work in Islamic finance, even at a time when it was viewed as a rather marginal topic for international organizations, has helped to pave the way for its current prominent role in guiding sound practices. A good example is the IMF’s recent work with standard-setters toward establishing international norms and best practices for Islamic finance, and how best to incorporate these practices in surveillance work.

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